Why some hospitals cost Medicare more than others

May 10, 2012 11:15am

The Centers for Medicare & Medicaid Services revealed wide variations in cost efficiencies among hospitals, some just a few miles apart from each other.

For example, Los Angeles Community Hospital's average patient costs Medicare $24,644 during the stay and in the following month, 37 percent above the national median ($17,988). A similar patient, however, admitted to Ronald Reagan UCLA Medical Center across town costs Medicare $17,628--2 percent below the median, Kaiser Health News reported.

Since the agency quietly added the cost-per-Medicare-beneficiary scores of acute care hospitals to Hospital Compare last week, the data showed that patients treated at hospitals in Las Vegas, Fort Lauderdale, Newark, Miami, Los Angeles and Orange County, Calif., had treatment costs higher than the median, according to the Kaiser Health News analysis. On the flip side, patients treated at hospitals in Anchorage, Des Moines, Honolulu, Minneapolis and Portland, Ore., tended to cost Medicare less.

With these scores, CMS proposes that the measure will be tied to inpatient prospective payments, in which Medicare spending per-beneficiary would account for 20 percent of a hospital's value-based purchasing score, starting Oct. 1, 2014. The goal is to reduce cost inefficiency and to encourage evidence-based care.

Hospitals, however, question whether the scores accurately reflect performance and quality. Although the cost-per-Medicare-beneficiary scores do account for patient mix, healthcare experts note that the new data doesn't examine patient outcomes.

"The efficiency measures are complex and contentious, and I do think they will be debated," Dan Mendelson, CEO of Washington-based consulting company Avalere Health, told KHN. "While hospitals understand that the system is moving there, they have significant questions, particularly about risk adjustment."

The CMS data also indicated some patterns, in which the most expensive Medicare patients came from community hospitals or from teaching hospitals.

Tom Rosenthal, chief medical officer of UCLA Health System, said, "I wouldn't take any of these cost measures to the bank."